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Benchmarks resume northward journey; Sensex reclaims 74,600 mark
Apr-29-2024

Indian equity benchmarks resumed northward journey after a day’s break and ended with solid gains with frontline gauges recapturing their crucial 74,600 (Sensex) and 22,600 (Nifty) levels. The markets started on a positive note and extended gains as the day progress amid positive global cues. Sentiments got a boost as economic think-tank National Institute of Public Finance and Policy (NIPFP) said it has estimated India's GDP growth at 7.1 per cent for the current fiscal, using high-frequency models. NIPFP said the Centre is on a fiscal consolidation path through buoyancy in taxes and revenue expenditure compression. Some optimism also came as S&P Global Ratings in the Asia-Pacific 2Q 2024 Banking Update stated that Indian banks' credit growth, profitability and asset quality would remain robust in current fiscal reflecting strong economic growth, but they may be compelled to slow down their loan growth as deposits are not growing at a similar pace. 

Markets extended gains in late afternoon deals and ended near day’s high, after a private report estimates India's GDP growth at 6.6 per cent in the current fiscal helped by consumption expenditure, exports rebound and capital flows. It said the rapid growth of the middle-income class has led to rising purchasing power and even created demand for premium luxury products and services. Traders got support with a private report stating that intensifying heatwave is unlikely to significantly dent India's growth, even though it could cause some disruption in construction and farm activity.  Traders overlooked report that foreign investors pulled out domestic equities worth Rs 6,300 crore in April, (till April 26) on concerns over tweaks in India's tax treaty with Mauritius and sustained rise in US bond yields. Data with the depositories showed this came following a whopping net investment of Rs 35,098 crore in March and Rs 1,539 crore in February.  

On the global front, European markets were trading higher ahead of the release of Germany's flash inflation figures for April and the euro area economic sentiment index later in the day. Asian markets finished in green on Monday, after Friday's U.S. inflation data largely met estimates and diplomatic efforts intensified to reach a long-sought truce and hostage-release deal in Gaza. Traders looked ahead to the Federal Reserve's policy meeting on Wednesday after the central bank's preferred inflation gauge largely met expectations.

Finally, the BSE Sensex rose 941.12 points or 1.28% to 74,671.28 and the CNX Nifty was up by 223.45 points or 1.00% points to 22,643.40.

The BSE Sensex touched high and low of 74,721.15 and 73,922.34 respectively. There were 26 stocks advancing against 4 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.79%, while Small cap index was up by 0.07%.

The top gaining sectoral indices on the BSE were Bankex up by 2.70%, PSU up by 1.19%, Utilities up by 1.12%, Oil & Gas up by 1.02% and Power up by 0.90%, while Realty down by 0.99% was the lone losing index on BSE.

The top gainers on the Sensex were ICICI Bank up by 4.67%, SBI up by 3.09%, Ultratech Cement up by 2.93%, Indusind Bank up by 2.90% and Axis Bank up by 2.47%. On the flip side, HCL Technologies down by 5.79%, ITC down by 0.44%, Wipro down by 0.37% and Bajaj Finserv down by 0.01% were the top losers.

Meanwhile, the Reserve Bank of India in its latest working paper titled ‘Equity Markets and Monetary Policy Surprises’ has said that equity markets are impacted more by the expectations of future monetary policy than the policy rate surprises on the day of announcement of the policy by the Reserve Bank. 

This paper studies the impact of monetary policy announcements on the returns and volatility in the BSE Sensex by decomposing changes in Overnight Indexed Swap (OIS) rates on policy announcement days into target and path factors. The target factor captures the surprise component in central bank policy rate action, while the path factor captures the impact of central bank communication on market expectations regarding the future path of monetary policy.

The empirical analysis using daily data suggests that equity returns are impacted only by the path factor (i.e., market’s expectations of future monetary policy trajectory), while both target and path factors (both of which capture the unanticipated component of monetary policy) impact the volatility in equity prices. Further, an event study analysis undertaken by constructing short duration windows around the monetary policy announcements using intraday data also indicates that the path factor helps explain changes in equity returns.

According to the working paper, while the short duration windows are aimed at controlling for other potential drivers of equity prices, it may be noted that the monetary policy announcements are accompanied by regulatory and developmental measures which can also impact markets. The sparse trading on occasions in the OIS markets as well as other domestic and global developments during the narrow window can also impact the analysis.

The CNX Nifty traded in a range of 22,655.80 and 22,441.90. There were 32 stocks advancing against 18 stocks declining on the index.

The top gainers on Nifty were ICICI Bank up by 4.72%, SBI up by 3.14%, Indusind Bank up by 2.82%, Ultratech Cement up by 2.72% and Axis Bank up by 2.56%. On the flip side, HCL Technologies down by 5.87%, Apollo Hospital down by 4.64%, Bajaj Auto down by 2.39%, HDFC Life Insurance down by 2.17% and LTIMindtree down by 0.92% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 40.7 points or 0.5% to 8,180.53, France’s CAC rose 3.84 points or 0.05% to 8,092.08 and Germany’s DAX gained 2.44 points or 0.01% to 18,163.45.

Asian markets finished in green on Monday, kindled by the risk appetite ahead to Federal Reserve policy meeting on Wednesday, release of more earnings report, and key jobs data. Hang Seng extended winning streak to sixth straight session, recording highest level in five months. Investor sentiments buoyed with intensified bets on easing Chinese home purchase restrictions in major cities. Meanwhile, participants eyed upcoming April PMI data from China to gauge on economic health of world's second largest economy. Stock market of Japan was closed for Showa day holiday.

Asian Indices

Last Trade            

Change in Points

Change in %      

Shanghai Composite

3,113.40

24.40

0.78

Hang Seng

17,746.91

95.76

0.54

Jakarta Composite

7,155.78

119.70

1.67

KLSE Composite

1,582.66

7.50

0.48

Nikkei 225

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---

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Straits Times

3,282.05

1.95

0.06

KOSPI Composite

2,687.44

31.11

1.16

Taiwan Weighted

20,495.52

375.01

1.83
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